Russia Completes Biggest Emerging Bond Sale Since 2009

By Jason Webb -
Mar 28, 2012

Russia sold $7 billion of bonds,
the most by an emerging-market government since 2009, as soaring
oil prices boosted confidence in the world’s biggest energy
exporter.

The government issued $2 billion of five-year bonds at 230
basis points over U.S. Treasuries, $2 billion of 10-year bonds
at a spread of 240 basis points and $3 billion of 30-year bonds
at 250 basis points, said a banker with knowledge of the deal
who declined to be identified because he’s not authorized to
speak publicly. The yield spread on a 2044 bond for similarly
rated Mexico is 150 basis points and 131 basis points, or 1.31
percentage point, for Brazil’s note due in 2041.

The last time Russia issued 30-year securities was in August
2000, two years after its $40 billion domestic debt default.
Today’s sale was the biggest among emerging markets since Qatar
issued $7 billion of bonds in November 2009.

“Russia remains one of the most attractive investment-
grade issuers out there, and as an oil exporter the valuation is
still cheap to Mexico and Brazil,” Alvin Ying, an emerging-
market strategist at UBS AG in London, said by phone today.
“The issuance size was bigger than I had expected.”

The deal takes up the government’s entire quota for
international debt issuance this year.

Last Sale

Russia, rated Baa1 by Moody’s Investors Service, its third-
lowest investment-grade rating, last sold international bonds in
May 2011, when it raised 50 billion rubles ($1.7 billion) with
debt maturing in 2018. The government hadn’t issued dollar debt
since April 2010.

Brazil is rated Baa2, one step lower than Russia, by
Moody’s.

Rising oil revenue helped Russia achieve a budget surplus
of 0.8 percent of gross domestic product last year. Urals crude,
the country’s main export blend, has climbed 15 percent this
year and is up almost threefold since the end of 2008.

The government’s debt is equivalent to 12 percent of gross
domestic product, the lowest of any major emerging-market
country, according to the International Monetary Fund. The
economy grew a faster-than-forecast 4.3 percent last year.